Madhya Pradesh High Court Denies Bail To Tobacco Trader Accused Of ₹3.32 Crore Excise Duty Evasion

The Madhya Pradesh High Court at Gwalior has recently refused bail to a tobacco trader accused of evading around ₹3.32 crore in central excise duty by allegedly concealing tobacco packing machines and illegally manufacturing tobacco products.

Justice Rajesh Kumar Gupta observed that the trader's claim that one of the two machines found during the search was non-functional could not, at this stage, weaken the prosecution case.

“Mere oral assertion during search proceedings that the machine was not operational cannot prima facie dislodge the prosecution case at the stage of bail.”, it observed

The case concerns Vikash Gupta, proprietor of Hunka Traders, against whom proceedings arose after a CGST Department search at his Gwalior premises on March 19.

Investigators alleged they found two electricity-operated tobacco packing machines, raw tobacco material, flavoring substances, and finished tobacco pouches.

According to the department, Gupta had central excise registration but did not disclose the packing machines after the new machine-capacity-based duty regime came into force earlier this year. Based on the fixed monthly duty prescribed per machine, authorities calculated the alleged evasion for February and March at approximately Rs 3.32 crore.

Gupta's defence was that the demand itself was inflated. His counsel argued that only one machine was operational, while the second was non-functional, making the department's calculation speculative because it rested on presumed capacity rather than actual output.

The Court was not persuaded. It noted that no declaration reporting breakdown or non-functioning of the second machine had been made before the competent Commissioner. That omission, the Court found, undercut the defence at the bail stage.

The court further observed, “At this stage, this Court cannot undertake a detailed adjudication regarding actual production, actual utilization or exact liability. Such disputed factual issues are matters of evidence and trial.”

The prosecution also told the Court that the investigation remains ongoing, with inquiries into the procurement of machinery and supplies.

Viewing the allegations as a serious economic offence involving substantial evasion of government revenue, the Court dismissed the bail plea

For Petitioner: D.M. Bhalla with Shri Shivam Gupta 

For Respondent: Praveen Surange for GST